The S&P 500 bears showed some strength last week and triggered a sell. The S&P 500 ended up finishing the week down .97%. The good news is for the bulls is that the S&P 500 is still above short-term support, still within the bull channel, and above the most recent broad trading range.
The longer-term momentum is still lending itself to US equities since the S&P 500 is still greatly outpacing the MSCI All World (ex-USA) index and short-term treasuries. We still want to focus on buy signals over sell signals until the relationships or dynamic of the markets change. The international markets continue to falter and if they continue with their trajectory, they will certainly finish October under the 12-month performance. This would mean the broad international indexes propose a high risk scenario according to longer-term momentum.
It was an active week in the portfolio. We sold the small cap position, bought half back into large cap. We got stopped out of the US Treasury position. Lastly, we bought a half position into the US Dollar. The result is taking some risk off the table and diversifying slightly.
This week should be interesting as the S&P 500 is essentially starting the week on support from it’s breakout point and bull channel and market breadth is certainly oversold. These three items do build the case for the bulls coming into the week. So, if the S&P 500 does hold, it could give a reason for the bulls to hold some resilience and if it does not, the dynamic of the S&P 500 certainly turns more towards the bears. There are no new purchases on the list for this week, but we may adjust some stops up to take some additional risk off the table if the markets bring in more bearish price action. Have a great week!
Adam Straseske, CMT